What is a Power Purchase Agreement (PPA)
A Power Purchase Agreement (PPA) is a power offtake agreement between two parties, being a (green) electricity producer and an offtaker of this electricity, such as an electricity consumer or trader. A PPA includes all the terms of the agreement, such as the amount of electricity to be supplied, the negotiated price, who bears what risks, the required accounting, and the penalties if the contract is not honored. As it is a bilateral agreement, a PPA can be adapted to the wishes of the parties involved, so the supply contract can take many forms. Electricity can be supplied directly or virtually via a PPA (see below).
Generally, a PPA is a long-term contract, such as ten or fifteen years. It (partially) removes the risk of fluctuations in the electricity markets, which is desirable for large, debt-financed projects. PPAs are also concluded for the continued operation of renewable energy installations when they no longer receive subsidies.
A growth in the number of PPAs is also visible in Belgium. An example is the PPA that Google concluded with Engie for the supply of offshore wind for its data center.